Real Estate and the Arbitrage Pricing Theory: Macrovariables vs. Derived Factors
Two empirical models are used to implement the arbitrage pricing theory: the factor loading model (FLM) and the macrovariable model (MVM). This study compares the ability of these two models to explain real estate returns using equity REIT returns as a proxy. Two tests are performed: a comparison of crosssectional adjusted-R2's and the Davidson and Mackinnon test. The results show that while the two models perform equally well during the period 1974-1979, the MVM outperforms the FLM over the periods 1980-1985 and 1986-1991. In addition, both models suggest superior financial performance for EREITs relative to other investments in the market during the period 1980-1985. Copyright American Real Estate and Urban Economics Association.
Year of publication: |
1997
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Authors: | Chen, Su-Jane ; Hsieh, Cheng-Ho ; Jordan, Bradford D. |
Published in: |
Real Estate Economics. - American Real Estate and Urban Economics Association - AREUEA. - Vol. 25.1997, 3, p. 506-523
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Publisher: |
American Real Estate and Urban Economics Association - AREUEA |
Saved in:
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